Monday, February 12, 2007

Significant Income Mobility

The table above (click to enlarge) is from the paper "Family Income Mobility - How Much is There and Has It Changed," and shows significant income mobility over a 23-year period by tracking the exact same households from 1968 to 1991.

The bottom row tracks those in the lowest-income quintile in 1968, and shows that only 41.6% of that group stayed there for two decades, and almost 60% had moved up to a higher quintile, and more than 34% had moved to one of the three highest quintiles.

Among those in the next-to-lowest income quintile in 1968, almost 75% had moved up by one or more income group between 1968 and 1991.

The top row tracks those in the highest-income quintile in 1968, and shows that only about 47% of those individuals were in that same top quintile 23 years later, and 53% had moved down by one or more quintiles; 7% to the lowest quintile.

Bottom Line: There is significant movement up and down the income categories over time. The "top 5%" or "top 10%" or "the rich" are not closed groups, like a country club that is not accepting new members. Most workers start in one of the low income quintiles when they are young, make it into one of the top quintiles at the peak of their career, and move back to a lower income quintile in retirement.